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Buy vs. Lease

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Should You Buy or Lease a Mercedes-Benz?

J. Paul Getty (billionaire American industrialist) famously said, "If it appreciates, buy it. If it depreciates, lease it." When it comes to automobiles, this advice is every bit as apt.

After several years of decline, more folks are choosing to lease their latest vehicle. So what is driving the uptick in leasing? First, interest rates factored into lease payments are low. Leasing also provides an alternative to purchasing that, over the short term, provides a lower monthly payment and frees up more cash. Also, since leasing numbers have been down considerably, the supply of used cars coming off of lease is tight, meaning that used cars are more expensive. As such, leasing might be a better option until used car supplies increase as projected in a few years.

There are several advantages to leasing, many of which may make it a more appealing option than purchasing.

 

These benefits include:

Less cash upfront: Most leases require a small down payment, and some require no down payment at all. This makes getting into a new car more attainable for cash-strapped buyers, and it helps free up your nest egg for other important expenditures or further saving.

Lower monthly payments: Because you're only paying for the portion of the vehicle that you actually use, your monthly payments can be more than 30 percent lower than what you would pay every month were you purchasing the same vehicle.

More car, more often: Because your lease is ostensibly payment for use of a vehicle for a limited amount of time, leasing means that you have the option to upgrade to a new car every two to four years, depending on the length of your lease. Most leases now have a “sweet spot” of 24 to 36 months, meaning you will not have long to wait if you want the latest vehicle on the market.

Lower total maintenance costs: Many people lease for a term that is equal to or less than the length of the manufacturer's warranty. This ensures the vehicle is always covered under the warranty. You may also opt to include pre-paid maintenance of regular services with the lease, spreading the cost over the full lease period.

End of Lease Options: With leasing, the headaches of selling a used car are eliminated. When your lease ends, you can simply return it to the leasing company and walk away. If you love the vehicle and want to keep it, you can opt to buy it at a price that was determined at time of lease (the residual), allowing you to plan ahead for your purchase. Depending on your financial situation, you may also be able to extend the term of your lease (subject to restrictions and conditions – inquire with your sales professional).

Leasing Pros, Cons and Myths

Let's take a look at the pros, cons and myths of leasing so you can make the best decision for your situation and circumstances.

Pros of Leasing a Car

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Cons of Leasing a Car

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Myths of Leasing

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Pros of Leasing a Car

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New car, all the time: Leasing a car means you get to drive around in a sweet new ride without paying the not-so-sweet new-ride payment. For many people, this is a confidence boost that can’t be ignored. If you love cars and driving, this is a big perk.

The latest safety and technology without the down payments: Can you imagine still having the flip phone or bar phone you had even five years ago? Of course not. Cars are changing all the time too. Leasing allows you to stay current with features like Blind Spot Assist™, Hands-free Bluetooth telephone capability, Collision Prevention Assist Plus™, Lane Keeping Assist™, and more – all without having large down payments and depreciation to consider for each change of vehicle.

Fewer maintenance issues: Because you’re driving a newer car, you usually don’t have to deal with the regular maintenance issues that car owners face as their vehicles age. With a 24- or 36-month lease, you will most likely turn in your car before any of those problems start showing up (e.g. bad brakes, broken shocks, worn belts and batteries). If you lead a very busy life, or if you’re on the road a lot, this is one less stress you will have to deal with.

Leases are tax deductible for small businesses: If you’re self-employed or you own a business, you can write off your lease as a business expense. Ask your accountant or tax advisor for specific advice for your situation.

“Afford” a nicer car: If you’ve ever wondered how it is that so many people can afford to drive BMWs and Range Rovers, then wonder no more. According to LeaseGuide.com, around 75% of all luxury cars are leased, not owned. The reason is that banks generally don’t like to provide more than $30,000 for a car loan, which puts luxury automobiles outside the budget of most who have to borrow for purchases. If you want a car worth more than $30k and don’t have the money to make up the difference, leasing may be your only option. Leasing allows you to enjoy luxurious amenities without the exorbitant cost.

Few upfront costs: Speaking of costs, leasing allows you to get into a car with very few upfront costs. You often don’t need a down payment (or if you do, it’s fairly low), and your monthly payments are lower. Depending on your individual situation and the law at the time, your taxes may also be affected for the better. According to Edmunds.com, you could pay as little as half the sales tax during the lifetime of your lease than you would if you purchased the same new vehicle.

Dealership Information

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Contact Information

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Atlanta, GA 30305
Phone: (800) 897-9087
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The Final Word

Successful and affluent people pour money into assets and investments that go up in value, not in assets like cars that tend to only ever depreciate in value. Warren Buffet, for example, drives around a used pick-up truck during much of his personal time and has lived in the same house that he bought about 30 years ago. Buffet is as wealthy as he is due in no small part to due his understanding that possessions are not necessarily the most sound investment. Similarly, leasing a car doesn’t build financial value, nor does it eat up hard-earned money that would be otherwise better spent, invested, or saved elsewhere.

On the other hand, to some people, their car is an important part of their life. They love the feel of driving around a new car, and they love the convenience of not having to worry about maintaining an older vehicle. Leasing a car can be akin to renting a house; you’re paying money out each month, none of which builds equity for you. But consider leasing a vehicle more like a rent-to-own plan. You can enjoy the benefit of a new vehicle with less money spent out of pocket, and if you love it and want to keep it, a significant portion of what you have paid goes towards the purchase price – and it’s your choice!  

If you keep your car for five years or longer, or as the saying goes “until the wheels fall off," then leasing might still be a good option for you. Leasing would allow you to have a lower up front cost, lower monthly payments, and essentially defer your purchase of the vehicle until the end of the lease term at a price you’ve already agreed to.

Whether you buy or lease a car is a highly personal decision. Like every issue, there are pros and cons. Consider about your passions, your finances, and your personal situation carefully before making a final decision. And remember, we are here to help you with more information every step of the way.

The information in this article was excerpted from MoneyWatch© on CBS, Consumer Reports©, Edmunds.com©, LeaseGuide.com©, and Mercedes-Benz Financial Services USA, LLC.
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